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Ideal Mortgage Bankers, LTD d/b/a Lend America - Order to Cease and Desist

State of New York Banking Department


In the Matter of

Ideal Mortgage Bankers, LTD d/b/a Lend America

A Licensed Mortgage Banker Pursuant
to Article 12-D of the New York Banking Law

- Respondent -

ORDER TO CEASE AND DESIST


The New York Superintendent of Banks (“Superintendent”), having determined that Ideal Mortgage Bankers, LTD d/b/a Lend America (“Lend America” or the “Company”), a corporation licensed to engage in the business of a Mortgage Banker under Article 12-D of the New York Banking Law (“Banking Law”) and located at 520 Broadhollow Road, Melville, NY 11747, has engaged in, is engaging in, or is about to engage in acts or practices constituting violations of Article 12-D of the Banking Law and regulations promulgated thereunder, hereby issues the following Cease and Desist Order ("Order") pursuant to Section 39 of the Banking Law.

I.
BACKGROUND

  1. Beginning on or about Tuesday December 1, 2009, the New York State Banking Department (the “Department”) became aware, through a press release issued by the U.S. Department of Housing and Urban Development (“HUD”), that (i) the Federal Housing Administration (“FHA”) had withdrawn its approval of Lend America as an FHA-approved lender, thus prohibiting it from originating and underwriting new FHA-insured mortgages or from participating in the FHA single family insurance program, and (ii) the Government National Mortgage Association (“GNMA”) had defaulted Lend America, so that it would no longer be permitted to issue GNMA securities.  Both actions became effective on November 30, 2009.
  2. Subsequently, Lend America’s former counsel notified the Department that GNMA had informed Lend America on November 30, 2009 that the withdrawal of Lend America’s FHA-approved status represented an immediate default under GNMA’s Guaranty Agreements with Lend America and GNMA had requested the company to transfer servicing of GNMA-guaranteed mortgage loans to a GNMA approved issuer within 21 days.  The former counsel also notified the Department that the company had decided to cease operations and discontinue originating mortgage loans.
  3. Based upon this information, the Department directed Lend America to provide a Loan Pipeline Report, a Closed but Unfunded Loan Report and a Report of Loans Closed within the past 90 days.
  4. In response to the Department’s request, Lend America submitted a Closed but Unfunded Loan Report listing six closed but unfunded New York loans totaling $973,601 and a Pipeline Report listing 192 New York applications for mortgage loans totaling $60,266,916.
  5. On December 2, 2009, Lend America’s warehouse line provider informed the Department, via teleconference, that it had suspended the Company’s use of its credit facility.
  6. During a teleconference held with Lend America on December 3, 2009, Lend America notified the Department that it did not possess sufficient financial resources to fund the six closed but unfunded loans or the loans covered by the 192 mortgage loan applications from New York loan customers remaining in its pipeline.
  7. As of the date of issuance of this Order, Lend America has not funded or arranged for the funding of the six closed but unfunded transactions or the 192 loans covered by loan applications from New York customers.

II.
VIOLATIONS

Based on the information in paragraphs 1 through 7, the Superintendent finds that:

  1. Lend America is in violation of Section 38.7(a)(8) of Part 38 of the General Regulations of the Banking Board for its failure to disburse loan funds on loans closed on New York property.
  2. Lend America’s failure to disburse funds may be considered a default of its financial engagements, which may result in substantial harm to the persons afforded the protection of Article 12-D of the Banking Law.
  3. Lend America is in violation of Section 410.1(b)(2) of Part 410 of the Superintendent’s Regulations for its failure to maintain an existing line of credit of not less than $1,000,000 from an approved provider.
  4. Lend America has engaged in, or is about to engage in, acts or practices which warrant the belief that Lend America is not operating fairly, nor demonstrating the financial responsibility or character and fitness required of licensed mortgage bankers pursuant to Section 592 of the Banking Law, which is a ground for revocation of Lend America’s license pursuant to Section 595 of the Banking Law.
  5. Pursuant to Section 595(1)(b) of the Banking Law, the Superintendent may revoke a mortgage banker’s license if he finds that any fact or condition exists which, if it had existed at the time of original application for such license or registration, would have warranted the Superintendent in originally refusing to issue such license.  Had the facts and conditions outlined herein existed at the time of the original mortgage lender license application submitted by Lend America, the Superintendent would have been warranted in refusing to issue such license(s).
  6. Pursuant to Section 595(2) of the Banking Law, the Superintendent may, for good cause shown, or where there is substantial risk of public harm, suspend a mortgage banking license for a period not exceeding 30 days, pending investigation.  The facts and conditions set forth in Paragraphs 1 through 7 present sufficient grounds for the immediate suspension of Lend America’s mortgage banker license pursuant to Section 595 of the Banking Law.
  7. The Superintendent is responsible for ensuring the safe and sound operation of the institutions and entities that the Department licenses and regulates, to make certain that such institutions and entities operate in an authorized manner and in accordance with applicable laws and regulations.  Whenever it appears to the Superintendent that a licensed mortgage banker is conducting business in an unauthorized or unsafe and unsound manner, Section 39 of the Banking Law authorizes him to issue an order directing the discontinuance of such unauthorized or unsafe and unsound practices, among other things.
  8. The Superintendent believes that prompt action is necessary to address the violations set forth above and to determine whether additional enforcement action(s) may be necessary to protect the public interest.

III.
ORDER TO CEASE AND DESIST

NOW THEREFORE, the Superintendent hereby orders that:

  1. Lend America, its Executive Officers, employees, independent contractors, or agents operating on behalf of Lend America and their successors or assigns, shall immediately cease, for a period not exceeding 30 days from the date of this Order, to engage in the activities of a mortgage banker, as defined under Section 590 of the Banking Law, relative to any residential property in New York, not otherwise specifically permitted by the terms of this Order.  Such action includes soliciting or accepting, either directly or indirectly, any residential mortgage loan applications from consumers for residential property located in New York.
  2. No later than two business days of the effective date of this Order, Lend America shall establish and maintain, at a bank insured by the Federal Deposit Insurance Corporation (“FDIC”) and located in New York, an escrow account for the purpose of (A) funding (i) mortgage loans which have closed but have yet to be funded, (ii) loans which Lend America has committed to close and fund, and (iii) FHA loans approved for funding prior to November 30, 2009, and (B) holding fee payments made by borrowers with respect to all such loans.  In the escrow agreement covering the engagement of the escrow bank, the escrow bank shall subordinate, in favor of the borrowers who are beneficiaries of this Order, any right of set-off or counterclaim or any lien or security interest in the escrow account, or the funds in such account, that the depository might otherwise have.  Lend America shall maintain accurate records with respect to all amounts placed in the escrow account.
  3. Lend America shall immediately deposit and maintain in the escrow account 100 percent of the loan amount for unfunded closed loans and loans cleared to close.
  4. Lend America shall immediately deposit and maintain in the escrow account any fees previously collected from New York consumers relative to any pending mortgage loan applications that have not been cleared to close.  Such fees shall remain in the escrow account until the loan has been cleared to close and the amount of the loan has been deposited in the escrow account.
  5. Lend America shall immediately deposit and maintain in the escrow account 100 percent of the unfunded loan amount for any partially funded loan and any mortgage loans refinanced by Lend America where sufficient funds have not been disbursed to the prior lien holder to pay off the prior loan.
  6. Lend America shall notify each New York mortgage applicant or the mortgage applicant’s broker of the status of any applications or loans and whether Lend America intends to fund the loan or arrange alternative funding.
  7. Lend America shall immediately take action to find an alternate funding source for all loans closed that remain fully or partially unfunded as of the date of this Order and loans which Lend America has committed to close and fund, including placement of such loans with a licensed mortgage banker, or an Exempt Organization, as defined in Section 590 of the Banking Law.
  8. Lend America shall take steps to fund or transfer, in accordance with FHA guidelines, all FHA transactions approved prior to November 30, 2009.
  9. With respect to each closed but fully or partially unfunded loan on New York residential property, Lend America shall reimburse the borrower any excess cost incurred by the borrower, including but not limited to closing fees and interest charges, necessary to put the borrower in the same position as if Lend America had funded the mortgage loan under the terms and conditions agreed upon at the closing of the loan.
  10. With respect to each closed but fully or partially unfunded loan on New York property, Lend America shall release any lien filed in connection with such loan.
  11. Lend America shall submit to the Department by 5 p.m. Eastern Standard Time daily, a liquidity report, in the format prescribed by the Superintendent, listing such information as the Superintendent deems necessary for the Department to determine Lend America’s ability to fund closed loans and loans Lend America has committed to fund and close.
  12. Within seven (7) business days of this Order, Lend America shall submit to the Department a complete listing of all loans closed for the period from July 20, 2009 to and including December 1, 2009, that remain unfunded or partially funded. This list shall include but not be limited to:
    1. Borrower name(s)
    2. Address and telephone number of borrower
    3. Loan number
    4. Property address, if different from borrowers address above
    5. Amount of closing fees
    6. Amount of each loan
    7. Closing date
    8. Type of transaction
    9. Product type
    10. If partially funded, date funded by Settlement Agent
    11. Reason why funding was not finalized
  13. Should the Department find that Lend America is unable or unwilling to provide an accurate listing of unfunded or partially funded loans as required in paragraph 12, Lend America shall retain the services of a third-party consultant approved by the Department to conduct a thorough review of the settlement documents and identify all loans closed during the period indicated in paragraph 12 and report such finding to the Department.
  14. By 5 p.m. Eastern Standard Time on each business day following the date of submission of the initial report described in the preceding paragraph, Lend America shall submit to the Department an updated list of all loans closed but not funded, reflecting the current status of such loan on the reporting date.  This list shall include the information detailed in Paragraph 12 as well as the following:
    1. Date funded for all loans that were funded since the previous report
    2. Funding Source and/or Lender
    3. Any changes in loan terms
    4. Amount of refund or reimbursement of consumer fees required
    5. Status of first or second liens not previously paid off

  15. As soon as possible, but not later than three (3) days after the effective date of this Order, Lend America shall submit to the Department a balance sheet and year-to-date income statement, prepared as of the business day prior to the date of submission and attested to by a duly authorized officer of Lend America.  The balance sheet should reflect Lend America’s cash position at each of its depository banks as well as Lend America’s bank account numbers.
  16. Lend America shall not pay or declare any dividend, member distribution, bonus or  severance pay or otherwise authorize any other material distribution of Lend America’s assets to any officer, director, member, owner, employee or relative of any officer, director, member, owner or employee or any company owned, controlled or operated by such individuals without the prior approval of the Department.  Upon the effective date of this Order, Lend America shall implement or revise its practices and procedures, as necessary, to ensure that its financial books and records are accurately maintained, in a manner illustrating compliance with the provisions of this paragraph, and are available for review by the Department’s examiners upon request.
  17. Nothing in paragraph 15 shall prevent Lend America from paying ordinary operating expenses relating to leases and salaries of individuals employed or contracted to finalize the funding or wind down of the Company’s operations.  However, Lend America shall furnish to the Department upon request details of payments made pursuant to this paragraph.  Further, Lend America is prohibited from making payments under this paragraph to any company owned directly or indirectly by an officer, director, member, owner, employee or relative of such individuals.
  18. The effective date of this Order shall be the date of issuance as set forth below
  19.  All written communications to the Banking Department regarding this Order should be sent as follows.

    Attention:

    Rholda L. Ricketts
    Deputy Superintendent of Banks
    Mortgage Banking Division
    State of New York Banking Department
    One State Street,
    New York, New York 10004

  20. All written communications to Lend America regarding this Order should be sent as follows. 

    Attention:

    Helene DeCillis
    Executive Vice President
    Ideal Mortgage Bankers, LTD d/b/a Lend America
    520 Broadhollow Road
    Melville, NY 11747

Witness, my hand and official seal of the Banking Department at the City of New York, this 4th day of December, 2009.

 

____________________________
Richard H. Neiman
Superintendent of Banks

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